Chapter 5: State retirement benefits Flashcards
Igor, who reached State Pension age in May 2017, is in receipt of the full State Pension. He does not require this income and is considering deferring it.
(a) Explain briefly why the only deferral option available to Igor is an increased State Pension.
(b) Describe how his increased State Pension will be calculated following a period of deferral. No calculations are required.
(a) His only option is to receive an increased future income because, he reached State pension age after 5 April 2016.
(b)
* He will receive State Pension
* plus any Statutory annual increases/triple-lock
* plus a 1% increase
* for each 9-week period of deferral.
Helena’s civil partner, Suzie, died 6 weeks ago. Helena is 45 years old and has three children with Suzie, aged 12, 16 and 21. Helena has been advised she may be eligible to claim Bereavement Support Payment (BSP) and would like to understand how this works.
(a) Explain briefly the eligibility criteria for Helena to make a successful claim for BSP
(b) State how much BSP she could receive and for how long.
- claim within 3 months of Suzie’s death to get the full amount.
- claim within 21 months of Suzie’s death but not receive the full amount.
- Be under State Pension age.
- Living in the UK/country that pays bereavement benefits.
- Suzie must:
- have paid sufficient National Insurance contributions/at least 25 weeks in one tax year.
- Or died because of an accident at work/disease caused by work.
- They must be married/civil partners.
(b)
* Lump sum of £3,500.
* Plus £350 per month.
* For up to 18 months.
Matteo, aged 64, is currently employed and does not have enough qualifying years of National Insurance (NI) contributions to be entitled to his full State Pension at his State Pension age of 66.
a) State the possible reasons why Matteo may have gaps in his NI record.
(b) Outline how Matteo can fill these gaps and by what date(s) any action must be taken.
- He was living abroad at some point.
- He was working but with low earnings/low profits.
- He was not working and not claiming any benefits.
(b)
* He can pay voluntary class 3 National Insurance contributions;
* for the past 6 years.
* He has until 5 April 2025*;
* to pay voluntary contributions to make up for gaps between April 2006 and April 2016/and for 2016/17 and 2017/18.
Sabine, aged 63, is about to retire and would like to understand how much State Pension she will receive.
Explain to Sabine how her State Pension will be calculated and how it will increase each year, once in payment. No calculations are required (9).
- It will be based on her National Insurance (NI) record
- before 6 April 2016.
- Calculate the amount she would get under old State Pension rules.
- Reduced where contracted out/increased where accrued State Earnings Related Pension Scheme (SERPS)/State Second Pension (S2P).
- Calculate the amount she would get under new State Pension rules (assuming they had been in place at the start of her working life).
- This provides your starting/foundation amount.
- If the old State Pension is higher then this is her protected payment;
- which is paid on top of the full new State Pension
- and increases in line with CPI.
- If her new State Pension is the higher figure then that is what she will receive.
- The new State Pension increases each year by the highest of earnings, CPI and 2.5%/triple-lock.
Identify five key pieces of information which are included on a State Pension benefit statement.
- State Pension age (SPA).
- National insurance (NI) record/qualifying years/gaps.
- State Pension estimate based on current NI levels.
- State Pension estimate at SPA based on National Insurance Contributions (NICs) continuing/full NIC record.
- What can be done to improve the forecast.
- Estimate of benefits if the State pension is deferred.
In respect of an individual receiving their State Pension, explain briefly;
(a) how the timing is determined for the initial and ongoing payments;
(b) the tax treatment.
- Payment date is based on NI number.
- Paid in arrears/first payment within 5 weeks of reaching SPA/first payment date falling after SPA.
- Paid every four weeks.
- Must be claimed.
(b)
* Paid gross no tax deducted.
* No NI deducted.
* Counts as income/taxable/it uses part of your Personal Allowance.
Jemima and Sourav, permanent UK residents, live together as a couple but are not married. Jemima is due to reach State Pension age in January and Sourav will reach his one year later. They are seeking advice regarding their State Pensions. Jemima is particularly concerned she may not be eligible for a full State Pension and is considering applying for the Guarantee Credit element of the State Pension Credit.
State the conditions that must be met in order for Jemima to receive the Guarantee Credit element of the State Pension Credit.
- They must have both reached SPA
- or Jemima has reached SPA and is claiming housing benefit.
- Income is calculated jointly;
- and weekly income must be less than £306.85 (jointly);
- unless one of them has a disability/cares for someone.
- £10,000 or less will not affect a claim.
Sabine is approaching her 66th birthday and would like to understand how much State Pension she will receive.
Explain to Sabine how her State Pension will be calculated. No calculations are required.
- It will be based on her National Insurance (NI) record;
- before 6 April 2016.
- Calculate the amount she would get under old State Pension rules.
- Reduced where contracted out/increased where accrued State Earnings Related Pension Scheme (SERPS)/State Second Pension (S2P).
- Calculate the amount she would get under new State Pension rules/ This provides the starting/foundation amount.
- If a new State Pension is the higher figure then that is what she will receive.
- If the old State Pension is higher then that is what she will receive/ this is her protected payment.
What is the triple lock based on?
State Pension will increase in payment by the greater of:
- Earnings, as measured by average weekly wage
- Prices, as measured by CPI
- Fixed, 2.5%
